KUDO CORPORATION

If order volumes decline significantly due to an economic downturn, contraction of the construction market, a substantial reduction in public works projects, or sharp fluctuations in supply-demand and prices in the housing market, this could have a material impact on operating results. The Group is working to expand earnings by allocating management resources to priority areas such as renovation, and by strengthening its detached-house basement, concept rental housing, and wooden building businesses; however, if market conditions change beyond expectations, an adequate response may become difficult.

A sharp rise in construction material prices or procurement difficulties, together with rising labor costs and a shortage of skilled construction workers, could worsen project profitability and affect operating results. The sales and construction departments work together to address rising labor and material costs, while striving to minimize risk by building an efficient construction system.

If serious defects occur in buildings or non-conformance with the Building Standards Act arises in the renovation business, this could lead to substantial compensation and repair costs and damage to social credibility, affecting operating results. The company works on quality control through the use of parts that comply with laws and regulations, appropriate assignment of qualified personnel, and operation of a long-term warranty system, but it cannot completely eliminate the occurrence of serious quality problems due to unforeseen circumstances or human error.

If an occupational accident occurs during construction work, this could result in increased construction costs due to work suspension or delay, compensation claims, and loss of social credibility due to administrative sanctions, affecting operating results. In addition to establishing internal safety standards, the company operates a "Safety and Health Management System" that includes risk assessment, and promotes efforts to prevent occupational accidents.

Because the company concentrates its business locations in Kanagawa and Tokyo, if natural disasters such as earthquakes, typhoons, heavy rain, or heavy snow, or the spread of infectious disease, occur in the greater Tokyo metropolitan area and cause business suspension or building damage, this could result in significant cost burdens and affect operating results. The company works to maintain continuity of critical operations through the formulation of a Business Continuity Plan (BCP), establishment of emergency contact systems at each location, dual data backup, and the use of remote work and web conferencing.

The company handles large volumes of personal information, including that of landowners, homeowners, and residents in the construction business, and of service recipients in the nursing care business; if a leak were to occur, it could damage social credibility and lead to compensation claims, affecting operating results. Measures taken include regular training for all employees, prevention of unauthorized access via firewalls, email filtering through a cloud security system, and prevention of data leakage through a PC operation log monitoring system.

The nursing care business is subject to the Long-Term Care Insurance Act, under which nursing care fee schedules are revised every three years; if system reforms such as reductions in nursing care fees or increases in the self-pay ratio are implemented, this could affect operating results. The company seeks to improve earnings and minimize risk through differentiation via rehabilitation-focused care homes, maintaining high occupancy rates, and increasing the proportion of certified care workers to obtain various premium fee add-ons.

The company is subject to multiple legal regulations, including the Construction Business Act, the Building Standards Act, the Act for Promotion of Proper Housing Quality Assurance, the Building Lots and Buildings Transaction Business Act, the Long-Term Care Insurance Act, and the Act on Social Welfare for the Elderly; if new regulations are enacted, existing regulations are revised or abolished, application standards change in ways that increase costs or impose new business constraints, or the company receives administrative sanctions, this could affect operating results and corporate reputation. The company thoroughly confirms relevant laws and regulations in advance, and conducts awareness activities on legal compliance for officers, employees, and business partners, as well as monitoring of compliance status.

If the profitability of any business segment declines significantly, it may become necessary to record impairment losses on land, buildings, goodwill, and other held assets, which could affect business performance and financial condition. The securities report does not describe specific countermeasures, and this is recognized as a risk in which trends in business profitability directly affect financial soundness.

If business operations and financial reporting are not conducted properly, serious risks such as delisting or revocation of blue-return tax filing status could arise. The company strives to ensure the effectiveness of internal controls by establishing a "Basic Policy for Building an Internal Control System," developing various regulations and manuals, monitoring the appropriateness of accounting treatment, and conducting educational awareness activities through the horizontal sharing of inappropriate cases.